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 Vietnam - Dollar price will increase by 1 percent only in Q4?

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lexie
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PostSubject: Vietnam - Dollar price will increase by 1 percent only in Q4?   Sun Nov 06, 2011 1:03 pm

November 5, 2011

Dollar price will increase by 1 percent only in Q4?

Just a short time after the commitment not to adjust the dong/dollar exchange rate by more than one percent in the fourth quarter of 2011, the State Bank of Vietnam has continuously raised the interbank dollar price, making the dong lose 0.85 percent of its value in October alone.

The exchange rate applied by commercial banks at transactions once hit the 22,000 dong per dollar threshold, and the dollar prices applied by banks sometimes were even higher by 200-400 dong per dollar.

Dollar getting more expensive and rarer


The Hanoi-based Hoang Duong Production, Trade and Service Company has bought 100,000 dollars from a joint stock bank at 21,650 dong per dollar to pay the debt which became matured last October. In fact, the price was 635 dong per dollar higher than the quoted price. As such, the company had to pay an additional sum of 60 million dong for the dollars, which was considered the “fee for counting money.”


Nguyen Thi Doan, Director of Hoang Duong, said on Saigon tiep thi that if the company had not demanded the voucher for the contract of “counting money,” the company could have bought dollars at lower prices, because the company could have been able to negotiate the actual prices with the bank officers. In this case, of course, the gap between the quoted price and the actual price would fall into the pocket of the bank’s officers.


Doan went on to say that the above said dollar price was 300 dong per dollar more expensive than the black market’s price, but her company had no other choice than buying dollars from banks, because it needed regular vouchers for entering into accounts.


While businesses have to buy dollars from banks at the prices higher than the quoted prices, other businesses have to sell dollars to banks at exactly the quoted prices.


Director of a fine art product export company in Thach That district in Hanoi said that if he sells dollars directly to the businesses that need them, he would get higher prices. However, his company has to sell dollars to banks, also because the company needs regular vouchers, or ask banks to act as intermediaries in the transactions with other businesses.


In both cases, the director said, banks can get fat profit from the transactions, at least several hundreds of dong per every dollar.

High hopes put on dollar supply and demand balance


Observers said that the State Bank of Vietnam recently spent a lot of dong to buy foreign currencies, with the net purchase of 7-8 billion dong, which has raised the foreign currency reserves to the revenue of 8 week of import – a considerable increase if noting that the level was just equal to the revenue of 3 week of import earlier this year.


Meanwhile, statistics showed that the difference between the lent and mobilized foreign currencies has decreased to 5.5 billion dollars from 7.5 billion dollars, partially because the demand for foreign currency loans has eased.


The observers have warned that in case the State Bank tries to curb the dong/dollar exchange rate, not to let the dong depreciate by more than one percent to fulfill its commitments, the nearest adjustment may occur in early 2012.


However, Le Xuan Nghia, Chair of the Finance Supervision Council, believes that any exchange rate adjustment, if it is made, would not be as big as that earlier this year.


Nghia said that the international payment balance is forecast to see a surplus of 4-5 billion dollars, while the foreign direct investment FDI is expected to increase by 3-4 percent. Meanwhile, the dollar supply is believed to be more profuse with the increase of 10 percent in kieu hoi (overseas remittance – the money sent by overseas Vietnamese people to their relatives in Vietnam).


Nghia stressed that the most important task for the period from now to the end of the year, is controlling the exchange rate.


“It is also important to force the dong interest rates down, but the central bank needs to consider the current conditions to decide how and when to do that,” Nghia said.


“If the dong interest rate is too low, more capital would be pumped into the national economy, the dollar price may soar, thus helping the high inflation return,” he added.


http://www.vietfinancenews.com/2011/11/dollar-price-will-increase-by-1-percent.html#more


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